Industry Letter to Commerce Secretary Regarding Free Trade Study

Letter to Undersecretary of Commerce Aldonas notes the findings of an independent research organization's study of the impact of various potential scenarios for a Free Trade Area of the Americas (FTAA), and includes findings bearing on scenarios under consideration for CAFTA as well – particularly the issue of “cumulation” with non-CAFTA countries in the Western Hemisphere. <BR>

The National Cotton Council has just received delivery of a study done by The Jassin-O’Rourke Group, an independent research organization with expertise in international textile and apparel production, marketing and trade. While the primary aim of the study was to evaluate the impact of various potential scenarios for a Free Trade Area of the Americas (FTAA), one of the study’s findings bears on scenarios under consideration for CAFTA as well – particularly the issue of “cumulation” with non-CAFTA countries in this hemisphere.

There have, for instance, been discussions among various U.S., Central American and Mexican interests in permitting certain Mexican-made fabrics, such as denim, to be shipped to CAFTA countries for cut/sew/assembly with the resulting end product then being eligible to be shipped into the U.S. market duty free. The study finds that such a CAFTA provision would be extremely damaging to US denim manufacturers, as indicated by the following excerpt:

Significant U.S.-made denim fabric is still used inMexicojean manufacturing today, due mainly to quality consistency, despite slightly greater pricing per yard and shipping cost. U.S.denim fabric is also used inCentral America, for a small volume of jeans, and for women’s and juniors’ fashion denim skirts and jackets. Given an FTAA or a CAFTA permitting use of regional fabrics from Mexico, Brazil or Colombia, the U.S. denim fabric business would be at significant risk, due to the combined cost savings resulting from both fabric prices per yard and lower labor costs in the Central American countries.

Mr. Secretary, the decision confronting U.S. officials on the cumulation issue boils down to a choice between supporting companies that made decisions to keep investment and jobs in the U.S. and those that made decisions to move investment and jobs to Mexico.

The undersigned organizations are committed to helping generate congressional support for a fair and equitable CAFTA that is supportive ofU.S.investment and U.S. jobs. We strongly urge you to stand by the fundamentals initially laid down by USTR inCincinnati– i.e., a NAFTA type yarn forward rule of origin with no provisions for TPLs or cumulation.